Thursday, September 17, 2009

TRADE WAR!

The developing dispute over US tariffs of Chinese-made tires is likely to drive prices higher for Americans as Chinese tire producers appeal for a collective price hike to soften the blow from the recently approved tax.

Chinese tire exporters are also urging the government to offer higher tax rebates, said Zhou Zhiyong, general manager of China's largest tire exporter Guangzhou Huanan Rubber Tire Co Ltd.

"Chinese tire producers have reached a consensus that we are going to raise the price on tire exports to the US by large margins," Zhou told Guangzhou Daily. He added that the move would make American consumers feel the pain caused by the new tariff.

This is not big. This is bloody huge. This is the start of a trade war with China. More than that, it's a preview of a likely result of passing cap & trade, namely that we'll have to pass massive tariffs to give U.S. businesses any shot at surviving in the global marketplace. I know health care and ACORN are big right now, but I think this deserves an equal share of the nation's attention.

Let me direct your attention to two key parts of this article. All boldface is added:

In other words, the entire rest of the damn world. And pay close attention to this next part:

In addition, China may sell its tires to countries like India, Japan, South Korea and Germany, who are likely to supplant China as the low-end tire suppliers to the US market...

Chinese imports come at the lower end of the price spectrum, where US producers have little interest in, or capacity for, making substitutes for the Chinese imports. More likely, their demand would be satisfied by imports from other countries who offer low-end, low-priced tires.

Got that? There is a reason U.S. companies don't make these tires: because it's not profitable enough. With metals there are material test reports that show who the manufacturer is and where the material originated. I don't know how the tire industry works, but if it's not as strict it's entirely possible we will still be buying these Chinese tires, just doing it through other countries like Japan & South Korea who will mark them up first. Or we'll be buying tires made in Japan & Korea which still won't help U.S. industry. Unless, that is, Obama enacts an across the board tariff that covers all import tires. Whatever happens, though, the American consumer loses because of increased costs.

What I don't understand is why Obama has decided to do this now, while he's in the middle of the health care fight, rising unemployment, and a host of other things. Is it as simple as he needed to pay back big labor? Is he trying to completely destroy our country? What explanation makes sense? No doubt this is going to be heralded by liberals as some sort of proof that he's a tough guy and willing to stand up to China.

The thing is, though, we have already put ourselves in such an incredible position of weakness with China that I don't see how we can be tough with them about anything until we start cutting spending and paying down the deficit. Obama's plan here is a little bit like walking up to the loan shark you haven't even begun to pay back yet, spitting in his eye and then smirking. Is that going to work? Hillary Clinton already went over there and begged them to buy more of our debt. Plus, how does Obama plan to fund Obamacare without a fully cooperative China to help out with all that increased debt that goes along with the price tag?

Also, protectionism is not going to revive the U.S. tire industry and make everything be well-run and profitable. If anything it will probably make it worse because these union-heavy companies will know that they no longer have any competition. And remember this strategy is the reverse of the Jedi mind trick the left is trying to play on us with health care and cap & trade, which is that the free market works as long as it's not free. This belief is the crux on which Obamacare and cap & trade are built. In one area, the theory is that cutting off access to fossil fuels will inspire the market to magically pull new technology out of its ass. For the other, it's that creating a government health care system (or "injecting competition" into the marketplace, depending on your rhetoric) will lower costs and increase quality of care. But, in the case of the tire industry, decreasing competition and jacking prices up will actually help everybody out. Which one is it, morons?

The big question right now is what will China do? They've already started an anti-dumping probe into U.S. poultry and auto products, but what will the result of that be? I don't see how they won't try to do the economic equivalent to us of breaking our legs with a lead pipe. Now they do have some peripheral drama going on, too, that may affect their decision, but I will be floored if they just take this lying down and don't retaliate. At the same time China is mulling this over, the United Steelworkers union (the same group that got the tire tariff increase) is just getting started:

U.S. Steel Corp. asked the U.S. Commerce Department to impose dumping and anti-subsidy duties of as much as 90 percent on some Chinese steel pipe imports, days after the Obama administration set tariffs on Chinese tires.

The petition was filed with the U.S. International Trade Commission against $400 million in imports of pipes used in chemical, petrochemical, refineries and related operations, according to Roger Schagrin, a lawyer for the U.S. producers. The U.S. imposed tariffs this month on a different type of steel pipe from China in a separate case.

By the way, this showdown has been simmering since before last Friday. Things certainly seem to be coming to a boil now. Please make sure your seat belts are securely fastened. It's going to get a little bumpy with Cap'n Barry at the helm.

5 comments:

I know it's tempting to believe in deeper meanings, to think this is part of a long game he's playing. In some cases, I grant he probably is, but not this one. This is a straight-up ass-pat to the unions.

Why? Well.General Motors has signed up to a 2bn yuan ($293m; £180m) joint venture with the Chinese state-owned carmaker FAW to make light trucks and vans.

The vehicles will initially be sold in China under the FAW brand, but could in future be exported under the GM brand.Bold mine.

Got that? Obama buys a big chunk of GM in June, and by August they're suddenly faced with the prospect of their truck division - which represents a not-insubstantial amount of business and a fair number of jobs - moving to China. Of course the UAW is shitting bricks.

Very nice tie in, Apoth. I had forgotten about the GM-China thing. Sounds like Obama will have to choose between the unions and China. That's why I'm so curious to see what becomes of their anti-dumping probes into our exports. If they start putting the screws to us, then I suspect you're right and there really is nothing else going on.

I'm resisting the temptation to refer yet again to Atlas Shrugged, here...

Oh wait, I forgot, Apoth. What about the India/Japan/Korea angle? The first question I had when I heard about these tariffs was, "What about Korean tires?" If I'm asking that, aren't they unions asking the same thing?

Then I read the article at the top. People still aren't going to be buying tires made in the US and those jobs still won't be coming back here unless Obama prices out all imports, but he hasn't done that (yet). That's the main thing that still doesn't make sense to me.

More people aren't taking about it because: * It bores them * No salacious bits * Most people can't see far enough into the future so they don't think it will impact them. * Tradewars aren't nearly as cool to watch on TV as the military wars. No gunshot, explosions or watching the op4s sex up a goat through NVGs.

This is also why Obama is pushing back on SOMETHING by picking low end tires. China is a HORRIBLE trading partner. They're even further left than Obama except they ARE traders and merchants while Obama and his Elitist asswipes are of the opinion that trade is a bourgeois thing and don't want to touch it.

They're either doing this because they're idiots, or because they're trying to get something else from China and thought that this could be the leverage.

If true, that's a shame, though I suspect you're right. I'll be the first to admit that I'm not the most exciting person, but this has so many ramifications it's hard for me to believe people wouldn't be interested. Then again, it's hard for me to believe that Obama got elected.

Of course China is a horrible trading partner, which is why I made the loan shark analogy. But Obama already took money from the loan shark, and now he's trying to act tough, yet he's still going to have to go back to the loan shark and pretty damn soon. That's why it doesn't make any sense.

Also, this isn't going to hurt China that much. They've got other markets to sell to. We don't have other markets to buy from, at least none that are cheaper. I'm inclined to say that the economic aspect is the best way to get people to figure out that we really can't do all of this BS that Obama wants to do. However, I've never won an argument by bringing up the fact that our nation is broke and questioning how we will pay for it. People just talk right over that like I didn't even say it or bring up completely irrational answers, like simply raising taxes. I've decided that it makes them even more supportive of Obama. When I bring up economics, they're probably thinking about their own government job that's facing budget cuts or their own $100,000 plus of student loans they're supposed to repay or their own lack of health insurance due to not working, and that makes them scared, and that makes them want to cling even harder to their nanny overman. They just want to be told there's no monsters under the bed, even if they're all over the rest of the house.